Budget excitement leads to higher rollover in Nifty futures

Total value of March open interest was Rs 1.7 lakh cr, compared to Rs 1.6 lakh crore seen in February series

Proof of the expectation attached to the Union Budget presentation was on display during Thursday’s derivatives expiry session, when the Nifty futures rollover hit a multi-year high of 80 per cent.

Analysts said rollovers for the March series were expected to be muted and in line with the three-month average, as is usual ahead of a big event like this one. The sharp rise showed the strong undercurrent of expectations that participants have been trying to underplay in the past few weeks, observers said.

“The rollovers in Nifty futures have been phenomenally good. It is all the uncertainty that is creating this excitement,” said Bhavin Desai, equity derivatives analyst with Motilal Oswal Securities.

The three-month Nifty futures rollover stands at 69 per cent. The open interest (OI) positions for the March series Nifty futures was 24 million shares, high compared to the average OI of 20 mn. However, this is lower than the OI of 25 mn shares seen at the beginning of the February series.

The total value of the OI was Rs 1.7 lakh crore as opposed to the Rs 1.6 lakh crore OI seen in the February series, data from analysts showed.

Analysts said it was unusual for traders and investors to raise exposure just before an important event. Market observers said the rollover was a mix of both long and short positions that had been carried into the March series.

“FIIs (foreign institutional investors) are still holding long positions but have reduced some. This is perhaps because they want to keep their positions light before the event. On the other hand, domestic institutions have rolled over the short positions that they have been stuck with for some time,” said Siddharth Bhamre, head of derivatives at Angel Broking.

Analysts said the expectations built into the market could lead to sharp declines. “When the OI is so highly leveraged, we usually see more hedging positions, which could be one explanation for the rise in the Nifty futures rollovers. The Budget Day session will definitely see a lot of volatility; expectations are very high. And, if these are not met, you can expect a sharp downturn,” said the head of derivatives of a domestic brokerage.

Bank Nifty rollovers were 73 per cent. The OI positions were higher compared to the previous February series.

The OI for the Bank Nifty futures at the beginning of the March series was around 2.1 mn shares and at the start of the February series was 1.98 mn. Derivatives analysts said FIIs were long on Bank Nifty futures as well, while domestics continued to remain short.